American Home Shield 2015 Annual Report Download - page 62

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44
The decrease in contract claims was primarily driven by lower claims costs due, in part, to an increase in the service fee
charged to our customers for service visits and, to a lesser extent, mild weather conditions, offset, in part, by the impact of favorable
adjustments to reserves for prior year contract claims of $1 million and $5 million in 2014 and 2013, respectively.
We incurred incremental selling and administrative expenses as a result of the HSA acquisition on February 28, 2014. The
increase in marketing costs was driven by incremental investments in our direct-to-consumer channel. The increase in legal expense
was driven by increased provisions for certain legal matters. The decrease in technology costs was driven by our decision in the first
quarter of 2014 to abandon our efforts to deploy a new operating system. Additionally, $1 million and $3 million reductions in tax-
related reserves were recorded in 2014 and 2013, respectively.
In 2014 and 2013, the segment’s Adjusted EBITDA included interest and net investment income from the American Home
Shield investment portfolio of $6 million and $5 million, respectively.
Franchise Services Group Segment
The Franchise Services Group segment, which consists of the ServiceMaster Restore (disaster restoration), ServiceMaster
Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (furniture repair) and AmeriSpec (home inspection)
businesses, reported an eight percent decrease in revenue and a one percent decrease in Adjusted EBITDA for the year ended
December 31, 2015 compared to the year ended December 31, 2014. The Franchise Services Group segment reported a seven percent
increase in revenue and comparable Adjusted EBITDA for the year ended December 31, 2014 compared to the year ended December
31, 2013.
Revenue
Revenue by service line is as follows:
Year Ended December 31, % of Revenue
(In millions) 2015 2014 2013 2015
Royalty Fees $ 117 $ 118 $ 115 50 %
Company-Owned Merry Maids Branches 42 62 63 18 %
Janitorial National Accounts 41 36 23 18 %
Sales of Products 18 23 23 8 %
Other 14 14 12 6 %
Total revenue $ 232 $ 253 $ 236 100 %
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
The decrease in royalty fees was primarily driven by lower disaster restoration services, offset, in part, by a $1 million
increase attributable to the branch conversions. Approximately $17 million of the decline in revenue from company-owned Merry
Maids branches was attributable to the branch conversions with the remainder of the decline attributable to a decrease in new unit
sales. The increase in revenue from janitorial national accounts was driven by strong sales activity. We intend to continue to focus on
expanding our market share in janitorial national accounts. The decrease in sales of products was driven by lower franchisee demand.
In 2014, we began converting company-owned Merry Maids locations to franchises. We expect the branch conversions
completed through December 31, 2015, as well as further branch conversions expected in 2016, to result in further decreases in
revenues from company-owned Merry Maids branches, which we expect will be offset, in part, by modest increases in royalty fees.
During the year ended December 31, 2015, we converted 38 company-owned Merry Maids branches to franchises. As of December
31, 2015, there were 29 company-owned Merry Maids branches remaining.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
The increase in royalty fees was primarily driven by increases in disaster restoration services. The decline in revenue from
company-owned Merry Maids branches was attributable to a decrease in new unit sales. The increase in revenue from janitorial
national accounts was driven by strong sales activity.
60 2015 Annual Report